BOJ’s “no action” bomb sends safe-haven assets higher, yen surges further
Equities – “Stunned like vegetable”, is probably the best word I can pick to describe the trading floor yesterday. The BOJ surprised the market by holding fire on further easing. The markets reacted drastically. USD/JPY tumbled 3% to around 108.00 during Asian and European trading hours, wiping out 3 weeks of gains within hours. The Nikkei cash closed 3.61% lower, and Nikkei futures extended losses to nearly 6% during US hours. The immediate support level for the Nikkei is 16,240, followed by 15,400. Asian markets were pulled down into negative territory. US 1Q GDP growth softened to 0.5%, lower than expectations of 0.7%. Slower growth will probably ease market concerns of a rate hike. The implied probability of a June rate hike has come down to 12%, compared to 20% a week ago.
UOB’s 1Q earnings dropped 4.4% yoy to S$766 million, in line with expectation. Revenues rose 0.7% to S$1.97 billion mainly due to higher net interest income. On the other hand, the non-interest income declined 8% due to lower wealth management fees and trading and investment income amid volatile market conditions. The non-performing loans ratio remained unchanged at 1.4%. The share price stayed composed at $18.85 after the news release.
OCBC’s 1Q net profit fell 14% yoy to S$856 million. The decline is mainly due to earnings contribution from Great Eastern Holdings, which dropped 59% yoy largely due to unrealised losses in its investment portfolio. The NPL ratio rose to 1.0% from 0.9% last quarter.
Jardine C&C’s 1Q EPS dropped 25% yoy to $0.36, far below the market’s expectation of $0.52. The company’s chairman said that “the group continues to face challenging trading conditions across the region”. Soft automotive demand in Indonesia, weak commodity prices and further deterioration in corporate credit quality are the main reasons behind missing expectations.
Commodities – Unexpected volatility sent safe-haven assets higher, with gold rallying nearly 1.7% to $1,267. The next resistance level is $1,286. Gold and US treasuries rallied after the BOJ’s decision to hold fire on further easing. Crude oil prices extended the rally as the US dollar weakened. WTI oil futures closed 1.3% higher to $45.85, a fresh five-month high. Silver traded higher at $17.62 this morning.
FX – The Dollar Index broke below a key support level at 94.00 and now trades at 93.60. USD/JPY broke a key support level at 108.00 and extended its losses this morning as the market continues to digest the BOJ’s “no action” decision that came out yesterday. The immediate support level for USD/JPY is 107.60, followed by 105.20. USD/CAD continued to find lower lows on stronger oil prices. GBP/USD has broken through above a key resistance level at 1.4600 and is now trading at 1.4630. EUR/USD advanced to 1.1360 due to a softer USD.
Key Technical levels to watch:
- Immediate support level: 107.00, followed by 105.20
- Immediate resistance level: 110.00